Judge Peter A. Hernandez, Case Number: 23PSCV02728, Date: 2024-03-04 Tentative Ruling

Proposed Intervenor AIG Specialty Insurance Company’s Motion for Order Granting Leave to Intervene in Action is GRANTED.

Plaintiffs Custom Alloy Sales, Inc. (“Custom Alloy”) and Endurance American Specialty Insurance Company (“Endurance”) (together, “Plaintiffs”) allege as follows:

At all times relevant, Custom Alloy was in the business of selling and manufacturing aluminum casting ingot; Thatcher Company of Nevada, Inc. (“Thatcher”) was in the business of the dale and delivery of chlorine. On or around September 2, 2020, Thatcher delivered a shipment of liquid chlorine to Custom Alloy. Thatcher loaded the chlorine from its truck into a liquid chlorine tank used in Custom Alloy’s operations. On or around September 6, 2020, Custom Alloy discovered a leak of chlorine from the storage tank, which eventually caused a chlorine gas “cloud.” Custom Alloy sustained damage to the tank and incurred pollution control costs and disruption of its normal business operations. Endurance is a surplus line insurer that provided an insurance policy, No. ARL30000785601 to Custom Alloy, with effective dates of October 1, 2019 to October 1, 2020 (“Policy”). Custom Alloy submitted a claim to Endurance for its damages and was paid in excess of $370,000.00.

On September 6, 2023, Plaintiffs filed a complaint, asserting causes of action against Thatcher and Does 1-20 for:

“A nonparty shall petition the court for leave to intervene by noticed motion or ex parte application. The petition shall include a copy of the proposed complaint in intervention or answer in intervention and set forth the grounds upon which intervention rests.” (Code Civ. Proc., § 387, subd. (c).)

“The court shall, upon timely application, permit a nonparty to intervene in the action or proceeding if either of the following conditions is satisfied: (A) A provision of law confers an unconditional right to intervene. (B) The person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person’s ability to protect that interest, unless that person’s interest is adequately represented by one or more of the existing parties. (Code Civ. Proc., § 387, subd. (d)(1).) “The court may, upon timely application, permit a nonparty to intervene in the action or proceeding if the person has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both.” (Code Civ. Proc., § 387, subd. (d)(2).)

AIG Specialty Insurance Company (“Proposed Intervenor”) seeks an order granting leave to intervene in the instant action and to file its proposed Answer-in-Intervention, on the basis that its insured, Thatcher, is a forfeited company.

“Pursuant to section 387 the trial court has discretion to permit a nonparty to intervene where the following factors are met: (1) the proper procedures have been followed; (2) the nonparty has a direct and immediate interest in the action; (3) the intervention will not enlarge the issues in the litigation; and (4) the reasons for the intervention outweigh any opposition by the parties presently in the action.” (Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383, 386.)

“An insurer’s right to intervene in an action against the insured, for personal injury or property damage, arises as a result of Insurance Code section 11580[1].” (Id.) The only manner in which an insurer may defend or exercise the powers of its insured suspended corporation is by intervening in the action under Code of Civil Procedure section 387 and asserting any defenses on behalf of its insured. (Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2006) 136 Cal.App.4th 212, 220.)

The court determines that intervention is appropriate. Proposed Intervenor has a direct and immediate interest in the litigation, because it may be required to satisfy any judgment entered against its insured, Thatcher, which is presently forfeited by the Franchise Tax Board. (Gallagher Decl., ¶¶ 5-7.) In addition, intervention by Proposed Intervenor will not enlarge the issues in this case, as Proposed Intervenor seeks to assert all defenses on Thatcher’s behalf and litigate any issues regarding Proposed Intervenor. Proposed Intervenor merely seeks to “step into the shoes” of Thatcher. The motion is granted.

[1] This provision reads as follows: “A policy insuring against losses set forth in subdivision (a) shall not be issued or delivered to any person in this state unless it contains the provisions set forth in subdivision (b). Such policy, whether or not actually containing such provisions, shall be construed as if such provisions were embodied therein.

(a) Unless it contains such provisions, the following policies of insurance shall not be thus issued or delivered:

(1) Against loss or damage resulting from liability for injury suffered by another person other than (i) a policy of workers' compensation insurance, or (ii) a policy issued by a nonadmitted Mexican insurer solely for use in the Republic of Mexico.

(2) Against loss of or damage to property caused by draught animals or any vehicle, and for which the insured is liable, other than a policy which provides insurance in the Republic of Mexico, issued or delivered in this state by a nonadmitted Mexican insurer.

(b) Such policy shall not be thus issued or delivered to any person in this state unless it contains all the following provisions:

(1) A provision that the insolvency or bankruptcy of the insured will not release the insurer from the payment of damages for injury sustained or loss occasioned during the life of such policy.

(2) A provision that whenever judgment is secured against the insured or the executor or administrator of a deceased insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.”